The promised ‘Never Before’ Budget is a damp squib and a ‘covert election manifesto’
The budget points to an aggravation of short terms pains, and gives the promise of uncertain and unlikely long-term gains
2020 was without doubt the most difficult year for the world since the end of the second world war. The economic contraction in the previous three quarters was never seen since the Great Depression days in the late 1920s. The global economy has shrunk by over 4 %. The Indian economy in 2020-21 is expected to contract by 7.7 %.
Despite several interventions to combat the pandemic-induced economic pressures, this fiscal year 2020-21 saw the decline of all key drivers of our economy including private investment, consumption, and exports. The industrial output of each of our eight core sectors shrunk. Employment in India contracted for the third straight fiscal quarter, alarmingly with women and fresh graduates suffering the maximum job losses according to the latest CMIE data.
With these conditions looming, Finance Minister Nirmala Sitharaman had her task cut out and she had promised a budget like never before. However, there are no noticeable reforms.
In the backdrop of the pandemic, healthcare was expected to be the biggest priority in this budget. A new scheme ‘Athmanirbhar Swastha Bharat’ focusing on improving healthcare infrastructure and vaccine rollout has been announced. Healthcare allocation has increased by 137 %.
Election going states including Kerala, Bengal and TN has multiple special mentions, giving this a semblance of a covert manifesto.
Infrastructure is the other big focus area. The National Infrastructure Pipeline (NIP) has now expanded to 7400 projects requiring a whopping Rs 111 lakh crore during 2020-25. There will be an infusion of 20,000 crore into public sector banks as part of its recapitalization plan. A novel concept of a bad bank that will take over the toxic assets of other banks is also announced. These are seen as steps that could revive the ailing banking sector and enable them to fund these mega announcements.
The allocated figure for recapitalization pales in comparison with the banking sector NPAs, which as of September 2020 stand at an astronomical 8.08 lakh crore. The hands of our banks would still be heavily constrained as they attempt to finance big-ticket projects. Asset restructuring and turning them around is a cumbersome as well as time-consuming task.
The Government has announced the creation of a portal for registration of migrant laborers and those in the informal sector, as a primary step for formulating other schemes including allocation of housing and food.
The immediate requirement was a greater allocation to urban and rural employment guarantee schemes and direct cash transfers. The most successful among these schemes, MGNREGA has actually seen a significant decrease in allocation, of Rs. 73,000, from the revised expenditure of Rs. 1.11 lakh crore in the current fiscal year.
Allocations have been reduced by 8.30% for the Dept. of School Education and Literacy, and by 2.82% for the Dept. of Higher Education, in comparison to allocations under Budget 2020-21. There are also no additional steps to bridge the digital divide among our students, arguably our biggest gap since this pandemic started, making many question the Government's priorities.
Military tensions on our borders, intermittent clashes with Chinese soldiers, and the possible threat of a two-front confrontation with China and Pakistan that is increasingly finding interoperability between their forces had made it a priority for us to put additional focus on our armed forces. However, the budget speech did not even have a single mention of the defence department. The defence budget that generally see near double digit hikes every year increased by a paltry 1.4 %.
Mere extensions of tax holidays and on capital gain tax exceptions for another year may not be enough to revive our startup sector. According to Nasscom almost 40 % in that space ceased operations during the pandemic.
Most of the new announcements this budget have long gestation periods and need much more planning to be fit for execution.
Budget is an exercise to balance Government expenditure and receipts. The previous fiscal year saw us falling short of our expected tax earnings by almost 3 Lakh crore. We could only meet a fraction of the disinvestment target of 2.1 lakh crore. 5G-spectrum auctions were postponed. We had to borrow an unprecedented additional 10.5 lakh crore. The fiscal deficit target, the gap between the income and expenditure nearly trebled from the budgeted 3.5 % to an unprecedented 9.5 %.
This budget again has misplaced expectations in the same streams. The deficit for FY22 is estimated to be a high 6.5 %.
Since we are starting from a very low growth base, we would see a definite spike in GDP growth. The Government has projected 2021-22 growth to be 11 %. However, the previous few years have given ample evidence that GDP growth do not translate to job creation.
Demand scarcity is the prime cause of our economic malaise. We should have taken steps to infuse immediate liquidity into the hands of enterprises and individuals, alongside policy changes and opening up more credit avenues. It would have jumpstarted consumption and investments.
There should have been a bigger focus on pandemic relief schemes.
The budget points to an aggravation of short terms pains, and gives the promise of uncertain and unlikely long-term gains.
(The writer is the National Co-coordinator of AICC Social Media Department. Views are personal)